12ERNOMICS VS THE REAL WORLD:

Romance versus reality: Iran's populist president is finding it hard to stay popular (The Economist, Jun 14th 2007)

MAHMOUD AHMADINEJAD won presidential office promising to give Iran's oil money back to the people. But he is finding the demands of populism hard to reconcile with economic reality. His government has recently been wobbling over implementing two of its biggest economic decisions: to bring in petrol rationing and to cut interest rates. [...]

The government has also made a hash of monetary policy. Mr Ahmadinejad has called for a cut in interest rates to 12%. Lending rates are capped at 14% for state banks and 17% for private banks. The money and credit council, which is meant to set rates, said in April that they should not be cut this year because of high inflation and the risk of hurting private banks.

Long-term cuts are meant to help create jobs by encouraging investment in business. But with high inflation and the threat of more UN sanctions hanging over Iran's economy, most borrowers are likely to pump cash into the booming property market instead. Even if Mr Ahmadinejad decides not to insist on the cut, his intervention has further worried businessmen who think his indifference to the plight of private banks shows he is hostile to private enterprise as a whole. This week, in an unusually bold move, 50 economists castigated the president for what they deemed to be his dismal economic policies.

For obvious reasons we'd all like to think that the Long War has been a desperate twilight struggle in which only Western heroism has preserved us from existential peril, but the reality is a bit different and can best be expressed as follows: crazy dudes don't govern good.

Posted by Orrin Judd at June 14, 2007 2:36 PM